Tuesday, October 22, 2013

Sustainability, Ian Dunlop and BHP


There is currently (and obviously) enormous interest in the idea of the market as the basis of a response to climate change. The language of the market provides a model of change that is seductive. It suggests that the future lies in our hands. Accompanying this vision has been a proliferation of industry-based sustainability criteria rating schemes. Annual reports seem to inevitably make reference to sustainability initiatives, ethical and responsible investment companies are proliferating, and sustainability conferences are attended by banks and mining companies. This emphasis on the market runs parallel to discussions about the role of government in creating a market for greenhouse gases, but is not necessarily determined by or dependent upon government.

The emphasis on sustainability makes good business sense on a number of levels. In the first instance, it overlaps to an uncanny degree with the notion of sustainable profits, it offers an opportunity to reduce costs through reducing power consumption and increasing efficiency, and it is a good marketing strategy that appeals to investors.

Against this response to climate change is the recent IPCC report, which argues that, to have a two-thirds chance of keeping global warming below 2ยบC, CO2 emissions from all anthropogenic sources will need to stay between 0 and about 1,000 [trillion tonnes], that the world has already blown through just over half that amount (531 trillion tonnes) by 2011, and that, at current rates of greenhouse-gas emission, the rest of the budget will have been spent before 2040. Ian Dunlop, who is currently standing for the board of BHP, describes Climate Change as a
“transformative issue which has life-and-death consequences”. Dunlop argues that impact of carbon on climate requires a “complete reappraisal of our lifestyle”, a change in values and a radical shift in investment away from oil and coal.
Dunlop’s argument raises some important and challenging questions about the need to define what constitutes meaningful corporate action on climate change. There is a need to separate the rhetoric form the reality, the distinction between marketing and materiality, between “‘vision’ and ‘execution’”.

The transcript of Dunlop's interview on ABC Radio National is below.
Thursday 17 October 2013
Ian Dunlop: BHP are doing a lot of good things in terms of addressing climate change. They have accepted that it is a serious issue, that action needs to be accelerated. They are looking at reducing their internal emissions quite extensively. That’s all good stuff. But I think the thing that is missing is the understanding that climate change is going to be one of these things that fundamentally alters the way that a company like BHP operates and I don’t believe that that is really understood strategically on the Board of BHP at the moment…
Climate change is not a single issue. It is going to permeate the entire operation of the company right across the board and fundamentally change the way a company like BHP operates. There is a need to take a broader strategic view which integrates the implications of climate change with the way that the company is operating, not just in terms of its day to day operations but very much in a strategic direction: which businesses do they invest in, which ones do they get out of.
Itsnot just a question of selling out of things [like coal] you have to find ways of sterilising those reservesbecause if you just sell out you solve nothing.
This is a major problem that we have never ever had before and it is at a much higher level than the way strategy is being formulated in corporate Australia at the moment and, I believe, in BHP. It does require ultimately a global solution, but it requires leadership from big corporations because politics is not going to lead. I think what is patently obvious over the last twenty years, but particularly in the last five years and the recent election, is that we will never see leadership within western democracies on an issue as complicated as climate change. It is going to have to come from the people who really have the major self interest in addressing it and who are going to have to design and implement the solutions, and that comes back to the BHPs of this world.
 
Trevor Thomas from Ethinvest: You have to see how clearly BHP matches its portfolio investment decisions with its public statements around these issues. They still have very substantial investments in thermal coal and other fossil fuels that will be subject to significant market change over the next fifteen to twenty five years.

Dunlop: I would like to think that it opens up the possibility of having a different conversation that might lead to me getting appointed to the board and I would hope that as investors start to understand the implications of this that they will start to broaden their thinking and that they will start to see this as the realmega-issue for their investments.



No comments:

Post a Comment